The sudden escalation of COVID-19 has disrupted the business operations of many enterprises, and businesses have realized that digital transformation is no longer an option; it is now indispensable for survival. In the new normal, where remote working is the norm, IT Services firms see a massive demand to support digital transformation initiatives.
Many traditional enterprises face significant challenges in implementing digital transformation in business. Hence, enterprises and IT services players are being approached by the companies to identify and fix the missing links in their respective digital puzzle.
Over the next three to four quarters, it is anticipated that most businesses will fast-track the deployment of digital technologies to support long-term business continuity, giving IT and Consulting firms an ample market opportunity.
Recent deals to accelerate digital transformation
In a recent development, global technology major HCL Technologies has signed an agreement to buy DWS Limited, a leading Australian IT, Business, and management consulting group, for about $115.8 million to expand its digital capabilities, mainly in Australia and NZ. DWS provides a range of IT services such as digital transformation, IT, commercial enterprise and management consulting services, and information and business analytics.
HCL is hoping to fortify its digital client portfolio in Australia and New Zealand with this acquisition.
The deal has once again demonstrated the growing trend of many IT majors firming up their digital transformation capabilities through collaboration or the merger and acquisition (M&A) route in recent times.
Earlier this month, Accenture announced the acquisition of Germany based technology consultancy SALT Solutions. IT Services major Infosys, too, subscribed to an agreement to purchase enterprise service management consultancy, GuideVision, for 30 million euros. (See: Infosys buys GuideVision to boost Dx capabilities). In July this year, global information technology, consulting, and business process services major, Wipro had also signed a deal to buy 4C, a leading Salesforce partner in Europe and the Middle East. (See: Wipro’s 4C buy to firm up its European presence). Simultaneously, we also had EY and IBM announcing their multi-year deal to help organizations accelerate their digital transformation goals.
Why M&A is the best bet?
Technology has enabled the customers to dictate terms even in a pandemic situation. And that’s what compels organizations’ to invest in new-age technologies such as cloud, data analytics, internet of things (IoT), robotic process automation (RPA), cloud-based workflow solutions, among others.
While there is a considerable demand for a comprehensive digital ecosystem, it is also true that IT Services behemoths don’t own all the capabilities to support digital transformation in business. They do not have time either to train themselves and support diverse IT frameworks in a cutthroat marketplace. To win market share in new geographic locations, improve competencies, and promptly add new offerings, M&A and strategic collaboration seem to be the most favored route.
By strategically acquiring relevant players, IT Majors can offer a range of new and specialized digital transformation services that can strengthen network performance, security standards, cloud methodology of their clients. Through acquisition and merger, solution providers can be in a lot better condition to aid their customers to harness the power of new-age technologies such as the Internet of Things (IoT), artificial intelligence, and data analytics to achieve incomparable success.
In 2021, the IT and Telecom industry is likely to see more strategic alliances and M&As to beef-up their digital transformation influences.